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SKYCITY Entertainment Group Limited (ASX: SKC), a company into the gaming entertainment business on 1 May 2019 provided a trading update at the Macquarie Investment Conference in Sydney, Australia.
SKYCITY Entertainment is the owner and operator of gaming, entertainment and hospitality facilities in New Zealand and Australia. It has long-term casino licenses. The company is listed on ASX and NZX and has two major projects NZICC/Horizon Hotel and Adelaide expansion in hand. The company has a strong focus on corporate social responsibility. The company also has significant experience in developing as well as operating integrated entertainment precincts.
In Auckland, New Zealand SKC has an exclusive casino licence valid up to 2048. In Hamilton, New Zealand, the company has an exclusive casino licence valid up to 2027. In Queenstown, New Zealand, the company has two licenses. The first is SKYCITY Queenstown with casino licence valid up to 2025 and second is Wharf Casino with casino license valid up to 2024. At Adelaide, South Australia, Australia, the company has exclusive casino license valid up to 2035 and full casino licence term valid up to 2085.
The SKYCITY Entertainment Group envisages to become a leader in entertainment, gaming, as well as hospitality segments. The business goal of the company includes improving operating performance, optimizing its existing portfolio as well as grow and diversify the business. The character and culture goals of the company is to offer a great and safe place to work, putting its customer first and be responsible leaders in its communities.
On the financial performance front, the company reported stable earnings over the last 5 to 6 years with an attractive dividend yield in the range of 5% to 6%. In FY2018, the Group revenue was reported at $1,097 million and Group EBITDA of $339 million. Local gaming (EGMs and Tables) is the key value driver for the group. Out of the total businesses of the company, Auckland alone generates over 70% of group EBITDA.
The company is committed to maintaining BBB- credit rating and intends to maintain the current dividend policy of distributing 80% of normalized NPAT. On the capital allocation front, stay-in-business capex tops the priority list followed by growth investments, debt repayments, dividends, and capital returns. The company is focused on capital discipline as well as improving returns.
The presentation also highlighted how the company optimized its existing portfolio. The company has settled the sale of Federal St car park for $40 million. SKYCITY Entertainment Group Limited had signed a binding agreement with Macquarie Principal Finance to sell long-term concession over car parks for $220 million in Auckland. The company also settled the sale of Darwin to Delaware North for A$188 million. The company is under the process of development as well as feasibility analysis for Auckland master planning. For the hotel development in Queenstown, the company had already acquired land. The OIO application is already being reviewed. The master plan in Hamilton to leverage riverbank opportunity is under progress.
The other growth opportunities of the company include the progressing strategy to grow the hotel business. The strategy of online casino is well progressed. The non-gaming attractions/partnerships for Auckland is secured by the company.
The YTD till 28 April 2019, the Groupâs normalized revenue was up by 4% on pcp. The domestic revenue excluding IB remained flat on pcp. There was a fall in the Group revenue by 2% on pcp as a result of low IB win rate.
Outlook: The company expects its group normalized EBITDA to be flat for FY2019 on pcp basis upon considering 2H FY2019 YTD trading and earlier settlement of Darwin sale. If Darwin is excluded for all of FY2018 and FY2019, the groupâs normalized EBITDA is expected to increase by 2% on pcp. The company expects that the Groupâs normalized NPAT for FY2019 would slightly decline as compared to its previous corresponding period (pcp).
SKC shares were trading at $3.650 on ASX ( as at AEST 1:30 PM, 02 May 2019) down by 0.273%.
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